Any law on crowdfunding in India? Gujarat High Court asks while hearing plea by Saket Gokhale against FIR

Crowdfunding could cause chaos if it is not properly regulated, observed the Gujarat High Court recently while hearing a plea filed by Trinamool Congress (TMC) leader Saket Gokhale against the criminal case registered in 2022 on allegations that he misused money raised via crowdfunding [Saket Suhas Gokhale vs State of Gujarat]..When Gokhale's plea to quash the case was heard on Monday (April 15), Justice Hasmukh Suthar noted the concept of crowdfunding is very new in India and questioned if there is any regulation or legal recognition of the same in India. "Is there any specific regulation for crowdfunding in India? Many countries have restricted it," Justice Suthar observed. The Court went on to observe that the Securities and Exchange Board of India (SEBI) has issued some regulations for investment in start-up firms and for crowdfunding. "But SEBI's regulations, I think are only for Non Government Organisations (NGOs) and not for individuals. This crowdfunding is a new subject... Many countries have not recognised crowdfunding and in India there is no clarity on it. Otherwise it may create a chaos," the judge added..The Court was dealing with a plea filed by Gokhale to quash a First Information Report (FIR) lodged by the Cyber Cell of the Ahmedabad Police in 2022 on allegations that he misused around ₹ 1.07 crores raised via crowdfunding and cash transfers. Gokhale had earlier been granted bail by the Supreme Court in connection with this case in April 2023. .On Monday, advocate Somnath Vatsa appeared for Gokhale before the High Court and asserted that there was no fraud involved in any fundraising by his client.Vatsa informed the Court that Gokhale had run three online campaigns and sought donations to sustain the same. All these campaigns, the counsel pointed out, had ended five months before the registration of the criminal case."If someone is saying I am raising money for my sustaining purpose and if people are donating, then there will not be a question that somebody has fraudulently taken money," Vatsa argued.He added that even the complainant herself has categorically stated that she 'donated' some amounts. The counsel emphasised that all the money received were through voluntary donations. .In response, Special public prosecutor Mitesh Amin highlighted that while Gokhale had raised around ₹ 76 lakhs through crowdfunding, only a fraction of the said amount was used for the stated purpose of filing queries under the Right to Information Act (RTI Act). "Out of this amount (of ₹76 lakhs) he spent only ₹282 on some query under Right to Information (RTI). Isn't this cheating and fraud? As per the records, most of this money was spent on investing in shares and purchasing air tickets. This man subsequently joined a political party. So what was the purpose of this fund collected through crowdfunding? He raised money under the guise of RTI, and other causes but used the amounts for himself. Is he a saint?" Amin argued. .Further, Amin pointed out that Gokhale has already been booked in an offence under the Prevention of Money Laundering Act (PMLA) on allegations that he misused these amounts. Meanwhile, Vatsa pointed out that if the instant petition for quashing of the FIR is allowed, then the PMLA case would not stand. Amin disagreed with this stance and argued that the present petition does not challenge lower court's refusal to discharge Gokhale in the case..The High Court will hear the matter next on May 1.